Let’s be honest, building your dream business from scratch is no easy task.
It starts off with a little dream and soon it becomes a HUGE life-consuming project.
Even though you start off with a ton of enthusiasm, the journey can test your limits.
You might find yourself wondering,
“Am I really cut out for this?”
“Can I really afford to be pouring all these resources into something that hasn’t made me a cent?”
“Should I just head back to my corporate life and forget about it?”
But look at you!
Here you are, on the other side of that self-doubt spiral with a business you can call your own and a comfy cash flow.
That is a HUGE accomplishment.
You have proven that your online business is profitable and now you are ready to go PRO.
And friends, I am SO glad you didn’t give up when things got tough. Your ideas are fab and your clients are so lucky to have you.
I am also glad that you are looking to go pro. And by that I mean, that you are ready to establish a legal entity for your biz.
This is going to help you stay legally protected and establish a lot of legitimacy in the online space.
You’re a pro, so make it known!
When you’re thinking of setting up a legal entity for your biz, you have to land on the perfect business structure.
And because there are quite a few options to choose from, I want to help you make the BEST choice for you.
So today, we’re going to talk about how to choose your business structure and the best one to build your online coaching business empire.
I’ll walk you through the four different business structures including how to register for them.
I’ll also tell you how much these options cost AND tell you the three professionals that you *must* talk to before making your final decision.
If you’re new here, I’m Molly Anna Luna, your life and business success strategist. I'm all about helping coaches, consultants and wannabe corporate escapees create lifestyle and financial freedom, or what I refer to as building true wealth.
I’m of the mind that having true wealth allows us to be present for the moments that matter most in life.
So, without further ado, let’s launch into the 4 options you have when it comes to choosing a structure for your business.
Right this way!👇🏻
The 4 Types of Business Structures
A sole proprietorship is the easiest business entity to set up.
So if you’re looking to keep it simple, listen up!
This is perfect for beginners because it doesn’t cost anything and only requires your social security number. If you are making $0-50,000 per year, then set up as a sole proprietorship.
This is why it’s the most common version of business entities for entrepreneurs in the United States.
But keep in mind that you will carry all of the managerial and financial responsibilities.
If you are ready to take that on, then this is the perfect structure for you during this early phase of your business journey.
Once you do have a little more cash flow in your biz you might want to take a look at a different structure.
A partnership is when two, sometimes more, people come together and sign an agreement to equally take on financial and managerial obligations for the business.
If you have a fabulous, responsible, and trustworthy business partner, this is a great option!
This structure is also easy to set up AND helps mitigate the risk against your personal finances.
If you and your partner in crime are looking to create a separate entity for your biz, this structure is the way to go.
Limited Liability Corporation (LCC)
A limited liability company is a partnership that benefits you and your partner but is set up like a corporate business structure.
This means that there is very little risk on your personal finances because registering as an LCC gives you insurance that acts as a buffer between you, your personal finances, and your business’s gains or losses.
Setting up this type of business structure takes a bit more paperwork and a small financial investment, but I’ll help you break that all down when we start talking pricing.
As a general rule of thumb, if you are making $50,000-$100,000 per year, then consider an LLC.
Registering your business as a corporation means that no one is solely responsible for the managerial, operational, and financial aspects of it.
It is officially a standalone structure.
You’ll be issued an EIN number so your personal and business structure finances will be completely separate.
And then your business will usually have a board made up of many different members with a variety of skills.
You might have a chief financial officer, a chief operating officer, and a chief executive officer, etc.
There are two different ways to set up a corporation: a C Corp or and S Corp.
Each option comes with different tax benefits that you’ll want to consider once your business hits a certain capital threshold.
In general, once you are making over $100,000 each year, then consider registering as a full-blown Corporation.
But don’t worry! I’m gonna help you figure what experts to meet with in order to make these kinds of big biz decisions.
Get an Expert’s Opinion When Deciding How To Choose Your Business Structure
Once you have a sense of what structure might be the most suitable, you need to get an expert’s opinion.
And friends, asking for help from someone who devoted their career to advising people on this specific topic is NEVER a waste of money.
It might seem like a big investment upfront, but try not to panic. Your investments in your biz always pay off!
Do what’s best for your biz and don’t cut corners when it comes to important decision-making milestones.
There are three pros you want to chat with when figuring out how to choose your business structure.
When your business feels like it’s moving from the idea stage into the implementation stage, you’ll want to set up a meeting with a lawyer.
Not sure where to find a trustworthy lawyer?
Rocketlawyer.com is an amazing place to start. They offer affordable and simple legal services that are perfect for new business owners looking to get legal support on a budget.
A lawyer is going to help you make the best choices possible to protect your business at whatever stage it’s in.
They can help protect you against unwanted litigation and heavy tax burdens that you and your business might face. Not only that, but they’ll advise you on overcoming licensing liens and other regulatory hurdles.
They’ll also help you protect your intellectual property and secure your ownership over your content.
Pro tip: When you head into your meeting with your lawyer, try and have an idea of what entity YOU think suits you best and go from there.
That way you can decide TOGETHER which business entity is best and review and draft contracts based on your lawyer’s advice and professional opinion.
Let’s be real, money stuff is NOT everyone’s forte.
And friends, that is totally O.K.
Remember we are about asking for an expert’s help and getting the support you need!
Here are 5 ways an accountant can help you and your business:
They can help figure out how to choose your business structure and establish the right choice for you. They can support you in minimizing your tax burden so you are maximizing your profit potential!
An accountant can check your numbers to help you decide the best price point for your products and services.
They will advise you about different accounting practices based on your specific needs.
Accountants are able to set up a record system for your financial reporting.
They have the skills to teach you how to analyze your financial statements, so you can make better business decisions in the long term.
Getting a handle on your finances will only make you a stronger business owner.
This is why it is so worth it to invest in personalized support from a trusted accountant.
The better scope your accountant has of your business finances, the better idea they have of what structure will suit you best.
If you are just starting out an accountant might advise you to choose a structure with little-to-no investment necessary - versus if you have a comfortable cash flow, they can let you know that you are ready to invest on a bigger scale.
If you are anything like me, you probably LOVE a plan.🙌🏻
Having a plan can make you feel cool, calm, and collected in the fast-paced world of online business.
This is why meeting with a banker is essential. Your meeting with a banker is all about planning.
During this meeting, you and your banker will review your business plan and help you avoid any potential future financial pitfalls.
They can also help you separate your personal and business finances by setting up the appropriate bank accounts. This will significantly decrease your personal liability if ever any legal blunders happen with your biz. Your personal assets won’t be on the line.
Your banker will also be able to analyze the financial trends in your business sector and provide insight into how they might affect your business in the future.
And - a banker will help calculate your break-even point for your cash flow projections. That way you’ll have a solid idea of when your business will start becoming profitable.
The information that a banker can offer about your business is priceless. You’ll walk out of this meeting with a better sense of where your business might be in a few months or years and how to protect your assets.
So do not under any circumstances skip out on this important conversation!
Knowing the ins-and-outs of what your financial plans look like will help you decide what type of structure is best based on the state of your finances.
Next Step: Register Your Biz ✅
Once you’ve gathered all the info you need from our three trusted experts and you’ve made your decision for how to choose your business structure, it’s time to register your biz.
To get started you need to have your paperwork in order.
Here’s a list of things you need to have on hand to get the ball rolling with your business registration:
Names of the owners or management structure
Board of advisory directors (for corporations)
Registered agent information
The number and value of shares
How many shares you want to issue (if you are incorporating)
You can register through your accountant or lawyer, but if you are hoping to keep those costs low you can also file using a service called Legal Zoom.
Whatever you decide, you will submit all the necessary paperwork through your government’s website.
This may vary from state to state so be sure to check what specific licenses are required in your jurisdiction.
When registering your business you’ll have the option to acquire an Employer Identification Number or EIN. This will help separate your business from your personal tax filings through the federal government and it may also qualify you for certain tax exemptions.
Yay for saving money! 🎉
Here’s another pro tip for you: Remember to register your business across different states.
The beauty of doing online business is that we can work together all across the world through the power of the internet.
But if your team is currently working virtually across many different states (In the US), you MUST register your biz with each of those individual states.
By doing this a lawyer or accountant will be able to help you keep track of which state is responsible for most of your revenue and advise you to file accordingly.
In most cases, registration will cost less than $300.
Of course, registering directly through a lawyer or an accountant may cost a little bit more than an online platform, but only do what is financially possible for you right now.
The platform I use to register my biz has always been Legal Zoom and the prices are very reasonable.
It cost me about $80 to file an LLC and $150 to file as an S Corp.
Where the big fees come into play, however, is in franchise fees.
When I was registered as an S Corp in California I paid $800 a year in franchise fees regardless of if my business turned a profit.